Irrevocable Trust Defined
As part of their estate planning process, some individuals decide they
prefer to have an
irrevocable trust rather than relying on more traditional methods of distributing their
assets, such as a last will and testament or making use of a probate court.
Instead, they transfer the ownership of various assets over to a trust,
thereby removing any personal tax liability from these assets upon their
death. The original owner, or grantor, does not retain any ownership rights
of the assets placed into the trust, nor can they do any of the following
without permission from their beneficiaries:
- modify the trust,
- amend the trust,
- or terminate the trust.
Decanting an Irrevocable Trust
Decanting an irrevocable trust is essentially the act of "pouring" the
assets from an old irrevocable trust into a new one. Not every state will
allow an irrevocable trust to be decanted, so it is important to check
with your particular state if you want to know if that option will be
available to you at some point in the future.
Often irrevocable trusts are created by a couple in order to pass down
as much value as they can from their assets. In many cases, there is often
a substantial amount of time between the death of the spouses, thereby
allowing some, or perhaps all of the assets in the trust to gain quite
a bit in value. This value, known as "tax basis" at tax time,
can have a significant impact on the amount of taxes due when the irrevocable
trust is closed and disbursed upon the death of the second spouse. In
order to avoid this situation, an irrevocable trust can be decanted or
poured into a new trust, thereby allowing the beneficiaries of the original
irrevocable trust to avoid additional income tax.
If you would like to know more about decanting an irrevocable trust or
any of our other estate planning options including advance directives,
guardianship planning, creating a conservatorship, spendthrift or charitable
trusts, and more, please